Exempt property and sole traders

Can I claim exempt property status for a sole trader?

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Hi all,

First off, happy new year to all.

I have a client that runs a livery stables and lives onsite on a farm. The client doesn't own the farm but rents it, so I'm wondering if the proportion of the rent for the farm that relates to the living quarters is deductible in the stable's accounts. Under normal 'private consumption' rules, I had assumed that I would need to add back a proportion of the rent, however, I've been looking at HMRC guidance on accommodation benefits and came across exempt properties for employees. Basically, accommodation at the place of work is exempt if your employees can’t do their work properly without it, for example agricultural workers living on farms.

This then led me to wonder if there is a parallel treatment for the self-employed i.e. if the sole trader could not perform their work (look after horses) without being on site, is the cost of their accommodation fully deductible?

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By Paul Crowley
01st Jan 2021 14:40

Do not try to compare employees with self employed
Look up rules on farmhouses

No longer deal with farms, but recently dealt with employee of Funeral people who had the accommodation BIK'd
£10,400 of BIK
Nice house right next to the business. Just the house, no free gas or electricity

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Replying to Paul Crowley:
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By lionofludesch
01st Jan 2021 15:19

Paul Crowley wrote:

No longer deal with farms, but recently dealt with employee of Funeral people who had the accommodation BIK'd
£10,400 of BIK
Nice house right next to the business. Just the house, no free gas or electricity

Yeah - but the OP's client deals with livestock, not deadstock.

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Replying to lionofludesch:
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By Paul Crowley
01st Jan 2021 15:23

Brilliant

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By lionofludesch
01st Jan 2021 15:34

Paul Crowley wrote:

Brilliant

Joking aside, it's an important point. Animals are much more likely to require 24/7 supervision.

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Replying to lionofludesch:
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By Tax Dragon
01st Jan 2021 15:40

It's unlikely that the supervision happens in the individual's living quarters.

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Replying to Tax Dragon:
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By Paul Crowley
01st Jan 2021 15:50

And the lovely lady client already had a house but was required to live in the adjacent accommodation.

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Replying to Paul Crowley:
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By Tax Dragon
01st Jan 2021 18:57

The lovely employee lady?

Some pertinent advice for you:

Paul Crowley wrote:

Do not try to compare employees with self employed.

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Replying to Tax Dragon:
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By lionofludesch
01st Jan 2021 15:53

Tax Dragon wrote:

It's unlikely that the supervision happens in the individual's living quarters.

He could watch them through the window.

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Replying to lionofludesch:
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By Tax Dragon
01st Jan 2021 19:00

Oh you meant monitor. I thought you meant supervise.

Anyway, I've not seen the layout of the place, to know which way the window faced.

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By lionofludesch
01st Jan 2021 19:49

You can't just leave animals on their own.

Have you never seen All Creatures Great and Small ?

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Replying to lionofludesch:
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By Tax Dragon
01st Jan 2021 21:38

Fun as this is, you are ignoring the question that the OP has asked. There is a specific exemption (more precisely, an exception from the BIK) for job-related accommodation for employees. It's in the legislation. You can read about it (when it applies etc) in s99 of ITEPA. (There are some other exceptions in the nearby sections.)

The OP's question (my paraphrase of it) is: does the legislation include specific provision for a deduction for accommodation costs for self-employed persons in similar circumstances vis-à-vis the work they do?

If I may be so bold as to paraphrase what you appear to be thinking, that paraphrase is: no, but the costs might be allowable anyway. If that paraphrase is fair, then I agree. There have been court cases (referring to W&E) about accommodation costs incurred by self employed persons. Which does kind of suggest the point isn't dealt with specifically by the legislation.

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By lionofludesch
01st Jan 2021 23:17

I'm ignoring the question because I haven't had any clients with livestock for forty years and my knowledge of the subject may not be entirely up to date.

However, if someone were foolish enough to consult me on the point, I would suggest that he - or, indeed she - should focus on the custom, law and practice of farmhouses, rather than try to draw parallels with biks.

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By Paul Crowley
02nd Jan 2021 15:13

Agreed
I should have stopped my first response at line 2

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By Paul Crowley
01st Jan 2021 20:26

Window opposite door
Otherwise the bookkeeping goes wrong

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By RetiredTax
02nd Jan 2021 10:40

As has been said, the Q is - is there an equivalent relief/exemption to the charge of BIK, for some traders, as there is for specific employees. If my old memory serves me well, Farm workers enjoy this but not Farmers where, in the case of a tenant Farmer an adjustment would be made, in part, for the farmhouse, even though he might be needed to tend his flock/herd/crops. Similarly a (sole trader) Publican, even though he is obliged to occupy the premises (at least it used to be, by virtue of the granting of the licence) has appropriate adjustments made to his outgoings. And I believe Directors are excluded from the relief/exemption.
So my vote is NO.
I hope this helps

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Replying to RetiredTax:
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By lionofludesch
02nd Jan 2021 10:52

BIM55250

"S34 Income Tax (Trading and Other Income) Act 2005, S54 Corporation Tax Act 2009

"A farmhouse normally fulfils a dual role being primarily the private residence of the farmer and his or her family and secondarily the centre of business operations on the farm. The farmer’s occupation of the farmhouse partly for business purposes means that the wholly and exclusively provisions apply to expenditure incurred in running the farmhouse. Only the proportion of the expenses such as heating and lighting, repairs, maintenance and insurance and, in the case of a tenant farmer, rent (see BIM55255), which is attributable to the business use of a farmhouse should be allowed as a deduction in computing farming profits.

"You may see cases where one-third of the farmhouse expenses is claimed as if this were a standard allowable proportion. There is no statutory authority for this fraction and the extent of any business use will always be a question of fact and degree in any particular case.

"From April 2013, farmers may, if they wish, choose to use the simplified expenses rules to calculate some of their allowable farmhouse expenses using a flat rate (see BIM75010)."

Make of that what you will.

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Replying to lionofludesch:
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By BettyBreckland
02nd Jan 2021 10:58

Hi all,

Thank you for your input. I've revisited guidance on 'wholly and exclusively' and taking account of BIM55255 I've concluded that adding back a reasonable apportionment of the rent is the most suitable course.

All the best for 2021.

BB

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Replying to BettyBreckland:
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By Tax Dragon
02nd Jan 2021 12:09

Correct approach. W&E is the appropriate test (ie the answer to your question is indeed "no"). Remember Tim Healy? Since in your case the client is renting a home, there's no chance that the whole cost is exclusively for business purposes. The whole of a proportion of some* costs? Yes. *Do those costs include the rent? Quite possibly.

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Replying to lionofludesch:
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By Paul Crowley
02nd Jan 2021 15:21

From way in the past I remembered a standard proportion being used at the first 2 firms I worked for
Could not remember if it was 1/3 or 1/6
Could possibly be the two chosen according to circumstances
BUT never a percentage back in those days

I even remember 1/7 being the standard private use for cars used by professionals
EG solicitors without any discussion with client as far as I was aware as all partners that the same fraction applied

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Replying to RetiredTax:
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By Tax Dragon
02nd Jan 2021 12:12

RetiredTax wrote:

Farm workers.... Farmers...

Employees.... Self-employed...

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By lionofludesch
02nd Jan 2021 12:29

What work is done at the farmhouse ? Does the rent include the stables and outbuildings or what ?

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Replying to lionofludesch:
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By Tax Dragon
02nd Jan 2021 14:11

Why ask? It's appropriate to raise pertinent issues for OPs to consider and apply to their (clients') situations. [As you and I (and others) have both done so far in this thread.] I don't see the need - or indeed consider it appropriate - to second guess answers, carry out fact-finds etc*. In fact, John Stokdyk has said as much. So I think I for one in 2021 will try to stick to John's guidance.

*The only reason I can see is so that one can give tailored answers and personalised advice. Which I thought everyone agreed was not what this forum was for.

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Replying to Tax Dragon:
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By lionofludesch
02nd Jan 2021 15:22

Tax Dragon wrote:

Why ask?

I'm interested.

Just because I'm now a racehorse owner doesn't mean I know about running a livery stable.

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Replying to lionofludesch:
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By Paul Crowley
02nd Jan 2021 19:58

Do not annoy TD
She always take the option of kicking the cat or the Crowley

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Replying to Paul Crowley:
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By Tax Dragon
03rd Jan 2021 09:11

It's nothing personal, Paul. I'm not Justin.

I never think of questioning a comment as kicking an individual. And I would never kick a cat... especially as (I think it's) Cheshire calls me a kitten.

Best way for Lion to learn how an equine business works is to become a stable boy. He'll have the time - I gather accounting will be taking more of a back seat this year. (So you can see the difference.... that's a comment about an individual.)

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